Inventory Reports

1. Inventory Reports • Red Lobster – Brigida & Erin • Ted’s Nebraska Grill – David Campbell • Blue Sushi – Brandon Thomas • McKenna’s – Meredith Beaver • Omaha Hilton – Stephanie Hatch • Stephanie Gigax • Red Robin - Kyle Shoemaker • Village Inn – Jessica Thomas • Michelle Hood

2. Approved supplier list Beverage alcohols Bid buying plan Capital expenditures Cost-plus purchasing Distributor sales representative Furniture, fixtures, and equipment (FF&E) Goods and services needs assessment Key Term Review

3. In-process inventory Nonperishable products One-stop shop buying plan Par Perishable products Perpetual inventory Physical inventory Pilferage Key Term Review continued

4. Plan of action (POA) Procurement process Purchase order Purchase requisition Ready-to-go Receiving Key Term Review continued

5. Request-for-bid Request-for-price Route salespeople Shelf life Spoilage Stockless purchasing Storage area regulations Value-added products Key Term Review continued

6. Inventory Control • Inventory and Purchasing 5 OH 5-6

7. Chapter Learning Objectives • Calculate correct order quantities. • Estimate appropriate timing of orders. • Explain perpetual and physical inventory systems.

8. Managing Inventory Volume Most important components of inventory management: • Knowing what products to order • Knowing when to order them

9. Inventory Turnover • A measure of how quickly food in storage is used. • The operation’s ordering procedure should reflect the inventory turnover rate of the operation. • Average annual turnover rate for full service • Food—20 • Liquor—8.5

10. Percentage of Sales Volume Two inventory level rules-of-thumb: • Inventory values should equal no more than 1 percent of total annual sales volume. • Inventory values should not be more than approximately one-third of the average monthly product sales.

11. Optimal Inventory Level Optimal inventory levels can be calculated by utilizing: • The par stock approach • The Levinson method

12. Calculating Product Usage Step 1 – Calculate customer forecast Customer count last period + (Customer count last period x %increase expected) Customer count forecast for this period

13. Calculating Product Usage continued Step 1 – Calculate customer forecast Customer count last period –(Customer count last period x % decrease expected) Customer count forecast for this period

14. Calculating Product Usage continued Step 2 – Calculate popularity index of the items

15. Calculating Product Usage continued Step 3 – Calculate supply needed

16. Calculating Product Usage continued Once forecasted supply has been determined, use one of the following inventory calculation methods. • The par stock approach • The Levinson method

17. The Par Stock Method Step 1 – Request and accept the supplier’s stated delivery schedule. • In most cases, the buyer cannot alter this schedule without incurring significant additional expense.

18. The Par Stock Method continued Step 2 – Determine par levels for each item • Par levels are affected by: • Frequency of vendor delivery • Available storage space • Product perishability

19. The Par Stock Method continued Step 3 – Calculate the order quantity. • Subtract the amount on hand (current inventory) from the established par level.

20. The Levinson Method Step 1 – Request and accept the supplier’s stated delivery schedule. Remember—the buyer cannot generally alter this schedule without additional expense.

21. The Levinson Method continued Step 2 – Determine par levels for each item. Recognize that product usage between order and delivery dates must be estimated.

22. The Levinson Method continued Step 3 – Forecast the amount of each item needed. Determine raw pounds (or other appropriate measurement) needed by computing: • Portion factor (PF) • Portion divider (PD)

23. The Levinson Method continued Portion factor (PF) computation

24. The Levinson Method continued Portion divider (PD) computation

25. The Levinson Method continued Order size computation

26. The Levinson Method continued • Given the following data, compute the number of cases needed to serve 1,575 customers: • Ingredient: Iceberg lettuce • Serving size: 4 ounce • Edible Yield: 75 percent • Minimum weight: per case: 36 pounds • Given the following data, compute the number of liters needed to serve 250 customers • Ingredient: Gin • Serving size: 55 milliliters • Servable Yield: 95 percent

27. Evaluate Edible Portion Costs of Ingredients • Given the following data, determine the EP cost for one serving of each ingredient: Ingredient Edible Yield Serving size AP Price/# • Raw Corned Beef Brisket 50% 4 oz $1.38 • Raw Corned Beef Round 75% 4 oz $1.45 • Cooked Corned Beef Brisket 90% 4 oz $2.98 • Cooked Corned Beef Round 95% 4 oz $2.45

28. Evaluate Edible Portion Costs of Ingredients • Given the following data, determine the EP cost for one serving of each ingredient: Ingredient Edible Yield Serving size AP Price/KG • Fresh Raw Spinach 60% 90 grams $1.75 • Frozen Leaf Spinach 100% 90 grams $2.95 • Frozen Chopped Spinach 100% 90 grams $3.25

29. Inventory Costs • The best operators compute economic order quantity (EOQ). • The EOQ is the most cost-effective amount to order. • The EOQ can be computed in dollars (EOQ in dollars) or number of units (EOQ in number of units).

30. Food Costs

31. Food Costs continued Standard cost Menu price

32. Inventory Control Methods • Perpetual inventory management • Physical inventory management

33. Inventory Loss Control Managers can minimize inventory losses by: • Installing proper locks • Prohibiting employee loitering near receiving and storage areas • Ensuring that accounts are credited properly • Clearly marking paid invoices as “PAID” • Comparing invoices with purchase orders

34. How Would You Answer the Following Questions? • The (Levinson method/par stock) approach is the ordering method which is most widely used. • AP price divided by edible yield percentage equals • Standard plate cost • Menu price • EP per product unit • Percentage of menu price • A __________ inventory system is based upon a theoretical count of inventory items. • Marking paid invoices as _________ can help operators reduce inventory loss due to theft or pilferage.

35. As purchased (AP) price Bin card Capital cost Carrying cost Customer count forecast Economic order quantity (EOQ) Edible portion (EP) cost EP per product unit EP per serving Key Term Review

36. Forecasted usage/supply of a particular item for this period Historical usage data In-process inventory Inventory turnover “Just in time” (JIT) inventory management Levinson method Management information system (MIS) Menu price Key Terms Review continued

37. Opportunity cost Optimal price Order size Par stock approach Percentage of sales volume Perpetual inventory management Perpetual inventory system Physical inventory management Key Terms Review continued

38. Popularity index Portion divider (PD) Portion factor (PF) Reorder point Standard cost Standard serving cost Storage cost Total annual costs Key Terms Review continued

39. Chapter Learning Objectives— What Did You Learn? • Calculate correct order quantities. • Estimate appropriate timing of orders. • Explain perpetual and physical inventory systems.